The Business of Ethics Remixed

Wednesday, August 1, 2007

Corporations have to integrate ’social responsibility’ into their business agenda to protect environmental, social and human rights of the vast majority. Corporate Social Responsibility (CSR) is a highly misunderstood and misinterpreted term in India. The core of CSR is what a company essentially does in terms of philanthropy or charity in the community in which it operates. This understanding of ’India Inc.’ has traditionally been continued, practised and modelled vis-?-vis the evolving global understanding of CSR that takes a larger view of business impacts and helps business achieve a balance or integration of economic, environmental and social imperatives.

Some Indian companies believe that merely complying with laws and regulations fulfills their need for social responsibility. This typical escapist response revolves around the argument that the responsibility to look after society largely remains with governments as companies pay taxes and duties.

Paradoxically, the emerging global perspective of CSR is essentially about behaviours that go beyond basic legal compliances, even charity and philanthropy. CSR is about commitments of organisations towards seamless integration of the marketplace, work-place, environment and community concerns into business operations in conjunction with stakeholders. A responsible corporate recognises that its activities have a wider impact on the society in which it operates. Therefore, it takes account of the economic, social, environmental and human rights impact of its activities on all stakeholders.

Historically, CSR has evolved worldwide as a response to market forces. The first ever known evidence was the large-scale consumer boycott of sugar in England against the exploitation of slave labourers in 1790. However, Cadbury’s social initiatives, started in the later part of the 19th century, present early evidence of corporate philanthropy. In India, the Tatas, in the first half of the 20th century, incorporated many responsible initiatives for employees into their business strategies, such as limited working hours, leave, provident fund and others. The Tatas initiated various labour welfare laws like the establishment of the welfare department that was introduced in 1917 and enforced by law in 1948. Maternity benefits were introduced in 1928 and enforced by law in 1946.

Recently, the boycott of milk products of Nestle in the early 1970s did fetch the attention of corporations. However, the primary drive for the ethical business and corporate social responsibility came from the US and Europe in the 1980s and 1990s, which witnessed consumer boycotts, shareholder action, ethical shopping guides, ethical product labelling, media campaigns and campaigns run by pressure groups, mainly civil society organisations.

Shell and Nike, in the mid-1990s, were compelled by ’ethical market forces’ to re-orient their business behaviour as their sales went down badly. The public agitated in Europe against Shell on the dumping of Brent Spar oil in the North Sea and there was a campaign against child labour and exploitation of workers in Nike’s factories.